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News Update: 6th February 2012 |
Greetings!
Please find enclosed a copy of our weekly news summary. Please feel free to pass this to anyone who could benefit from it.
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Energy Investment | |
Sale of Dollar Loan Portfolio
BNP Paribas, France's largest listed bank, is aiming to sell up to $11bn of loans to oil and gas companies and has received interest from Canadian buyers, according to two banking sources familiar with the situation. The sale is the latest sign of retreat by European banks, which have faced months of funding turmoil as a result of the Eurozone debt crisis and are pushing to offload dollar assets to shrink their balance sheets and build precious capital. Reuters, 27th January.
Public Accounts Committee Smart Meter Comment
The Public Accounts Committee report sounded alarm over the high costs (£11bn for the UK smart metering programme) and uncertain benefits of a scheme likely to disrupt the lives of millions. "This scheme is a recipe for expensive chaos," says Richard Lloyd, the executive director of consumer group Which? "We will have representatives of energy firms - which are less trusted than even the banks - visiting every home in the land to rip out the existing meter to install a smart one. Apart from the practical and security difficulties who will pay for this? The answer: the consumer". The Independent, 30th January.
US Could Open Offshore Oil and Gas Resources
President Obama is saying that his administration will open up more than 3/4 of the potential offshore oil and gas resources to development, prompting friends and foes alike to accuse him of having political motives. Energy Business Insider 31st January.
EDF Moves Closer on Edison
French electricity giant EDF has moved one step closer to its delayed takeover of Italian utility Edison, as key shareholders in the Italian company gave their final approval to the acquisition over the weekend. 1st January. Www.interfaxenergy.com
www.globalenergyadvisory.com |
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Gas | |
Ireland and the United Kingdom Are Not Fully In Line With EU Gas Market Rules
EU legislation aims at facilitating cross-border gas trade and increasing the capacity on gas markets. The EC considers that Ireland and the United Kingdom are not fully in line with EU gas market rules and has decided today to refer these countries to the Court of Justice of the European Union. IEWY News, 27th January.
US Natural Gas Futures at Low Levels
Natural gas futures, which had been trading above $4mn/BTUs in November, fell to below $2.30 (23rd January) as warm weather and over-production in the US continued. After Chesapeake Energy and other producers announced that they were making substantial cuts in their drilling programs in the coming year, futures rebounded sharply, closing out the week at $2.67/mn/BTUs. PO Review, 30th January.
US Gas Production
Natural gas was the big loser on the day. Call it a delayed reaction to yesterday's news from the EIA that production in the US topped 72 bcft during November. March contracts for natural gas fell 7.7%, or 21 cents, to settle at $2.503 per MBTU. Rigzone, 31st January.
Russian Development in the Republic of Tajikistan
Alexey Miller, Chairman of the Management Committee of Gazprom and Sherali Gul, Minister of Energy and Industry, Republic of Tajikistan.....met and the parties discussed the operational issues related to the present status and future prospects of Gazprom's projects in Tajikistan......In particular, to speed up the drilling of Tajikistan's deepest prospecting well, Shakhrinav-1p, in the Sarykamysh licensed area. Drilling operations have been underway since late 2010. So far, over a half of the total well depth (6,300 m) has been drilled. Rigzone, 30th January.
Tanzania Govt Preps Economy for Major Discoveries
The government has started working on strategies to prepare Tanzania's economy to accommodate huge investments in the natural gas sector in anticipation of major commercial discoveries in the next 5 years. Rigzone, 30th January.
Marcellus Shale
U.S. energy officials have cut their natural-gas-resource estimates, saying there is far less gas in a region known as the Marcellus Shale than previously thought. PO Notes, 30th January.
Pakistan and India
Pakistan and India made considerable progress in talks over a multibillion-dollar gas pipeline planned from nearby Turkmenistan. Pakistani and Indian officials met in New Delhi to discuss prospects for the $7.6bn Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline. PO Notes, 30th January.
Nabucco
The Nabucco gas pipeline proposal is considering ways of scaling back the venture after recent moves by Turkey and Azerbaijan raised questions about its viability....This project was first mooted 10 years ago...but the $8bn price tag is high and investors so far like OMV and RWE have failed to sign any supply agreements. Some critics wonder if they will ever have enough gas to fill the pipeline. FT, 1st February.
Shale Gas on the Border of Northern Ireland and the Republic of Ireland
Taboran Resources, a Canadian based shale gas exploration company, has said it has discovered a gas field with potential reserves of 4.4tncf if natural gas straddling the Border of Northern Ireland and the Republic. The company said it could develop the shale gas resources through a multi billion pound infrastructure project. FT, 1st February.
LNG Market Not Tight Yet
Mild winters in Europe and Asia could push the tightening of the global market for LNG out to next winter and delay a re-instalment of the oil-gas price correlation, JPMorgan said in a research note. ....Weak gas demand is reflected in prices. The benchmark UK gas price for delivery next summer has fallen some 22% since last summer as the economic crisis and a mild winter sapped demand...In the longer term, however, the bank said that the LNG market would still tighten as Asian demand growth would outstrip supply additions, and this would restore a tighter correlation between oil and gas prices. Reuters, 27th January.
No Need for EU Shale Gas Regulation
There is no need for new legislation to regulate shale gas exploration in the EU, according to a study published Friday (27th January) that proposed the bloc adopt a low profile on what is a controversial issue among its 27 member countries....The study says that existing legislation on exploration and production of fossil fuels--which are mainly aimed at guaranteeing safety and environmental protection--can apply to both conventional and unconventional gas. Rigzone, 27th January.
www.globalenergyadvisory.com
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Oil | |
Saudi Signals It Can Make Up Turkish Oil Short Fall
Turkey gets about 1/3rd of their oil from Iran. Its dependency ratio rose to 51% during the civil war in Libya. Only Sri Lanka which buys almost all of its oil from Iran is more dependent. ....EU bought on average 600,000 b/day of Iranian oil which accounts for ~ 20% of Iran's oil sales. China is Iran's biggest customer buying 500,000 b/day. FT (various articles on) the 30th January.
India Will Continue Importing From Iran
India's Finance Minister Pranab Mukherjee underlined New Delhi's resolve to continue oil imports from Iran despite the sanctions imposed on Iranian oil by the US and the European Union. India, the world's 4th largest petroleum consumer, is Iran's 2nd largest oil customer after China and purchases around $12bn worth of Iranian crude every year, about 12% of its consumption. Energy Trader Daily News/ FARS News Agency, 30th January.
China's Oil Demand Reaches 9.69mn b/day
China's apparent oil demand in December rose 0.7% year on year to 41.02mn metric tons, or an average 9.69 mn b/d, reaching new records despite slowing growth. PO Review, 30th January.
Nigeria
Nigeria's central bank told a parliamentary committee that subsidy payments for imported fuel totalled $11bn, as gasoline consumption in the OPEC member country had jumped by more than 100% over the past 5 years. PO Review, 30th January.
Kuwait Chose Total
Kuwait chose Total as the 3rd partner to build a $9bn oil refinery in China, as the Gulf state seeks a foothold in Asia's biggest consumer of refined products. PO Review, 30th January.
The IMF
The IMFalso said the oil-related sanctions imposed on Iran could add at least 20% to market prices for crude oil. PO Review, 30th January
Iran Update
There are numerous sub-plots to the embargo story. Some of the oil Iran ships to Europe is coming in repayment for investments that Italy, which is still owed $1.5 bn, has made in Iran. Tehran is threatening to cancel these contracts. It also seems that 95% of the world's oil shipments are insured by EU companies and insurance pools subject to the sanctions. Without proper insurance many tanker owners and destination ports would be reluctant to accept Iranian oil shipments. ...Although a handful of Iranian politicians continue to talk about closing the Straits of Hormuz in retaliation for the EU's embargo, the realization that Iran would be a clear loser in any military confrontation with the West is reducing such talk. The situation remains volatile but for now the ball is in Tehran's court. PO Review, 30th January.
Iran & Greece
Iran, the master of brinksmanship, is keeping the oil market guessing. There is an increasing possibility that Greece could become entangles in Tehran's dealings with Europe. Industry executives, well plugged into Iran matters, say that they expect Iran's next move to combine maximum PR benefit with minimal oil disruption. The question was asked what if Iran stopped selling to Greece which gets 1/3rd of its oil (100,000 b/day) from Iran? FT, 31st January.
Alaska and Greenland
Royal Dutch Shell PLC's plans to drill for oil and gas in the Arctic region will be centered on Alaska and Greenland, though the Anglo-Dutch major is also eyeing Russia's far north as an exploration frontier, said Chief Executive Peter Voser....Although Shell's intention to drill in Alaska has been well-documented--the company has received the necessary clean-air permits and expects to commence operations there this summer--the renewed focus on Greenland is the latest sign that the energy giant plans to open a new exploration frontier in one of the world's last undiscovered oil and gas provinces. Rigzone, 30th January.
UK, Launch of the 27th Offshore Licensing Round
Energy Minister Charles Hendry announced new opportunities for UK oil and gas exploration with the launch of the 27th offshore licensing round. 2,800 blocks are being offered as the Government ensures the UK gets maximum benefit from its resources. Rigzone, 2nd January.
End of Week Pricing
NY oil prices continued their slow downward trend that began in early January, closing on Wednesday at $97.61. London crude, which has been slightly stronger, continued to trade around $111 a barrel. The day's moves widened the NY/London spread to $13.95, the widest since November. So far this week there have not been any major developments in either the EU's debt crisis or the Iranian confrontation to move the markets. PO Notes, 2nd February.
www.globalenergyadvisory.com
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Nuclear | |
Boiler Recycling
Giant boilers from Berkely Power Station are to make their way to Sweden for recycling. The 5, 310-tonne boilers, each measuring 21.3m by 5.3m, will make the journey sometime during the end of March. Since the nuclear plant stopped operations in 1989 the boilers, of which there are 15 in total, had been left on site. However, Magnox has teamed up with Studsvik, a metal treatment company based in Sweden and ALE, a heavy lift company, to remove 5 of them. Reuters, 30th January.
Russia Commissions Fuel Storage Facility
The first phase of a centralized storage facility has been completed at the Mining and Chemical Combine (MCC) at Zheleznogorsk near Krasnoyarsk, Siberia. The initial stage of the facility - which was commissioned in December 2011 - will be used for storing 8129 tonnes of RBMK fuel from the 3 power plants in the country using that kind of reactor: Leningrad, Kursk and Smolensk. The used fuel from these plants is currently stored in on-site water-filled pools, but these are reaching full-capacity. World Nuclear News, 30th January.
The Cost of Japan's Extended Nuclear Shutdown
While NISA continues its work to review the preliminary assessments, supported by the Nuclear Safety Commission and the Japanese Nuclear Energy Safety Organization, reactors are still closing one by one for mandatory safety inspections. Currently only 3 are in operation from a potential operating fleet of 44, not counting the 10 Fukushima Daiichi and Daiini units....The 'secondary assessment' of Japan's program will be an overall evaluation that relates closely to the stress tests carried out in the EU and elsewhere. However, the IAEA said the secondary assessment is to "inform whether to continue or halt operations," implying that permanent closure of nuclear sites is a possibility.......If nuclear reactors do not restart, Japan faces the challenge of meeting summer peak demand without a large part of its usual power supply, although it is thought that continued energy austerity might be able to bridge the gap.........The cost of this extended nuclear shutdown, however, is catastrophic: Importing an extra ¥4.3tn ($55 bn) of fossil fuel tipped Japan's trade balance into the red for 2011; and today Bloomberg reported financial results from 6 Japanese power companies that counted total losses of ¥463 bn ($6bn) due to increased fossil fuel costs and idled nuclear capacity. World Nuclear News, 31st January.
Russian Privatisation
Having spent 5 years combining its nuclear power, engineering and research enterprises into the single entity of Rosatom, the Russian government now sees privatisation of the firm as part of a plan for industrial modernisation. World Nuclear News, 2nd February.
www.globalenergyadvisory.com
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Renwable Investment |
UK MPs Fight Over the Growing Wind Power Sector A cross-party group of MPs has been formed to fight the growing wind power sector which is central to Chris Huhne's energy policy. Critics of wind power say it is inefficient, expensive and a significant blight on the landscape. Conservative MP Chris Heaton-Harris who has set up the group, said: "Ministers need to look at this policy again. It is an inefficient technology it adds to the bills of consumers it is the wrong renewable for the UK. We need a change of policy." Britain's 3,000 wind turbines generate about 2% of the country's power, and only operate around 30% of the time. The Daily Telegraph/TUNSE 23rd January. Row Over Leaked CO2 Report Trade body Scottish Renewables has demanded that a report by KPMG and analysts at AF Consult be made public. The report said that Britain could meet its CO2 reduction targets by focusing on nuclear and gas-fired power generation, rather than renewables, and save £34bn. Scottish Renewables chief executive Niall Stuart said: "The conclusions seem to rely on some extremely pessimistic assumptions about the costs of renewables and some extremely positive ones about the future cost of gas and nuclear power." He wants to examine the figures closely. Scotland on Sunday/TUNSE, 22nd January. Indian Solar India's producing power from solar cells more cheaply than by burning diesel for the first time, spurring billionaire Sunil Mittal to jettison the fuel in favour of photovoltaic panels. PO Review, 30th January. Offshore Wind Financing Increases Despite the global economic squeeze, last year saw a 40% increase compared with 2010 in non-recourse debt finance for offshore wind power in Europe, as 9 new offshore wind farms moved closer to completion. With 2,375MW of new generation capacity under construction during 2011, installed offshore wind power within the European Union is set to increase by 62%, according to the European Wind Energy Association's (EWEA) 2011 review of the offshore sector. Windpower Monthly, 2nd February. www.globalenergyadvisory.com |
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Coal |
UK Coal UK Coal digs its way to profit. UK Coal extracted 7.5mn tonnes of coal in 2011 which will see it return to profitability after 3yrs of substantial losses. The company realised its production target even though its Daw Mill colliery produced virtually no output during December. The Independent/TUNSE, 24th January. New Mississippi River Coal Terminal Armstrong Coal is starting the engineering process to construct a coal terminal along the Mississippi River near the Gulf of Mexico....The coal terminal, located at Mile Post 61 on the Mississippi near Myrtle Grove, Louisiana, will boast a throughput of 6mn short tons with a possible expansion to 10mn/st....The project is scheduled for completion in 2014 and will handle Colorado and Powder River Basin coal. Platts, 30th January. South African Anthracite Off-take Interest Emerging Australian metallurgical coal producer ZYL Ltd has announced 2 additional non-binding expressions of interest for off take from its Mbila anthracite coal project in South Africa, the company said in a statement on Tuesday ((31st).....The Perth-based company has two projects in South Africa; Mbila and Kangwane. Mbila is located in the Kwazulu Natal province of South Africa, 105km from Richards Bay coal terminal, (production by Q2 2013) with 840,000 t/year in phase 1 and 1.5mm mt/year by phase 2. The Kangwane project is located in the Mpumalanga province of South Africa, close to port and rail facilities. (Production Q3, 2014) with annual output of 1.8 mn mt/year. Platts, 31st January. South Africa's Coal Industry Will Continue to Develop South Africa's coal industry will continue to develop to meet domestic energy demands, and the thermal coal needs of India, Europe and Asia, says international coal markets specialist McCloskey Group chairperson and founder Gerard McCloskey......McCloskey Group notes that India's thermal coal imports in 2010/11 were thought to have been about 75mn/t and, with imports for 2011/12 projected to reach around 90mn/t, South Africa is looking towards securing a large part of this tonnage......Meanwhile, the company notes that South Africa continues to have an advantage over its competition when port load rates and ship draft are compared, but that there are emerging uncertainties surrounding the ongoing reliability of State-owned freight logistics group Transnet's service. Mining Weekly.com, 26th January. Australian and Indonesia Coal Miners Are Eyeing Bangladesh Australian and Indonesia coal miners are eyeing Bangladesh as a potential new market after the authorities concerned have opted to import coal, instead of exploring its domestic reserves, traders and experts said. Meanwhile, the Bangladesh's option has also opened up scope for India to export its low quality coal to the former, traders said. Bangladesh has been importing some 2mn tonnes from that country annually. "For power generation, we will prefer coal from Australia or Indonesia as the Indian coal is not energetic enough to serve the purpose," Prof. Mohammad Tamim, a former special assistant on energy affairs to the past caretaker government told Financial Express (FE), 26th January. Panamax Glut The greatest number of coal cargoes in history still won't be enough to eliminate a glut of Panamax vessels, driving charter rates to the lowest in a decade. Shipments will rise 3.6% to 956mn metric tons this year, according to London-based Clarkson Plc. Rates for Panamaxes, each about 750-feet long, will average $12,744/day in 2012, the lowest since 2002, the median of 10 analyst estimates compiled by Bloomberg shows. Panamax charter costs already tumbled 53% since Jan. 1. Bloomberg, 31st January. MATS Retires Another 6 Coal Plants FirstEnergy Corp. subsidiary companies will retire 6 older coal-fired power plants located in Ohio, Pennsylvania and Maryland by September 1, the utility announced. The decision to close the plants is based on the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards, MATS, which were finalized in December, and other environmental regulations. Environment News Service, 27th January.
www.globalenergyadvisory.com |
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Energy Trading Dynamics |
REMIT is Working
European energy companies have started to disclose the timing of maintenance on oil installations - an unexpected consequence of new EU rules to improve disclosure on energy even though the regulation is not seen as covering oil.... An increase in the disclosure of potentially market-sensitive outages in the opaque physical oil market could affect prices and help level the field for traders and other players....Lawyers and EU officials have said that while natural gas and electricity are covered by the new law, oil is excluded, because it is regarded as more international than Europe's wholesale power and gas markets.... But BP Plc on Wednesday listed online an incident at the Hound Point oil terminal. A spokesman said BP was publishing more information following the new EU rules, which are called the Regulation on Energy Market Integrity and Transparency, or REMIT. Reuters, 26th January. Global Energy Advisory Comment: The new regulations are being taken seriously.
Tumbling Emissions and Weak Coal Prices Gives Coal Power Production a Boost
Coal-fired and renewable generation ate into natural gas' share of the UK electricity generation mix during the final quarter of 2011, a trend that has continued into 2012. A combination of tumbling emissions contracts, a weak coal market and the large-combustion plant directive (LCPD) incentivised the use of coal-fired plant, with dark and clean dark spreads outturning at multiples of their spark equivalents in the UK. But the march of renewables is another factor. While temperatures this winter have been above average, consequently reducing demand, strong windy days have seen wind power blow consistently, with gas seemingly the victim. Power Engineering, 2nd February. Cold Weather Increasing Gas Demand A Siberian cold front which has much of Europe in its grip meant that gas demand in the UK was expected to rise to over 400 million cubic metres (mcm) on Thursday, more than 18% above the seasonal norm of 331.1 mcm, National Grid data showed. Reuters, 2nd February. More on the Weather & UK Gas Storage Levels But expected gas flows were even higher at 407.4 mcm, driving prices slightly down from Tuesday and implying that some gas could be injected into storage. UK gas storage levels were filled to 74.24% on Tuesday, compared with a European average of 66.01% data from Gas Infrastructure Europe showed. London South East, 2nd February. Global Energy Advisory Comment: good storage levels can damped prices which is good news if your firm is about to change its gas supply contract. If you need any help come to us. Carbon Labelling Tesco is to ditch carbon labelling on all its products labels because the message is too complicated. FT, 31st January. SSE lost 50,000 electricity and gas customers in the UK and Ireland In the 9 months to the end of the year.... Customer accounts stood at 9.6mn. Household gas consumption by customers in the UK fell by 26.6% over the period, while consumption of electricity fell by 8.3%. BBC News, 31st January. Global Energy Advisory Comment: Previously it was thought that energy demand was relatively inelastic but this is clearly not the case. Weather has been milder and consumers concerned about prices and commercial firms caught from Carbon Reduction Commitment(CRC) are reducing their energy use. If your company is looking for finance to invest in CRC then give me or my colleague Roy a call as we have a solution called Prisim Finance.
www.globalenergyadvisory.com
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Our news update comments are provided by our Advisory CEO, Aily Armour-Biggs, any comments then contact her on aily@globalenergyadvisory.com or +44 207 692 0888.
Sincerely,
Anthony Francis
Global Energy Advisory |
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